Wednesday, April 09, 2008

Quick Market Update

* Broken Support - The NQ futures were the first to break below multi-day support on Wednesday, as consistent selling sentiment (NYSE TICK) and weakness in the financial sector eventually led the entire market lower. The shrinkage in stocks registering new highs as we approached the 1400 area of resistance in the ES futures and the loss of upside momentum among stocks--both noted in the Tuesday post--anticipated this breakdown. Now we're seeing an expansion of stocks making fresh 20-day lows amidst continued negative momentum. A rundown of Wednesday's indicators will be posted to tomorrow's Twitter comments.

* Deterioration of Technical Strength - Among the stocks in my basket of S&P 500 issues evenly selected from eight sectors, we're now seeing only 16 in uptrends, 9 neutral, and 15 in downtrends. Energy issues continue to shine, given strong oil prices. If you take those shares out of the mix, however, you see that strength is difficult to find among the sectors.

* Tale of Three Markets - We're seeing bull market highs for the Advance-Decline line specific to the S&P 500 energy stocks that comprise XLE. We're also seeing fresh bear market lows for the Advance-Decline line specific to the S&P 500 financial stocks that make up XLF. It's not a good sign that the AD Line specific to the S&P 500 consumer discretionary stocks that comprise XLY has also made a bear market low as of Wednesday. If we were on the verge of an economic turnaround thanks to central bank and government intervention, one would think that the lines would be moving higher in unison, in anticipation.